February 20, 2009

Web Service Offers Startup-Rating Algorithm

by ssavage

One San Francisco-based company is giving users the opportunity to discover startup companies in order to make a sound business investment. YouNoodle's Web site offers a system that scores a business by the "buzz" surrounding it. It gauges this information by referencing blogs, press releases and other factors for almost 30,000 startup firms.

"By watching the way the world responds to a start-up, we can give advance notice of what's hot and what's not," YouNoodle co-founder Bob Goodson told BBC News.

The Web site also features a Startup Predictor test to help new entrepreneurs learn estimate how much their business could be worth in three years.

"While dollars are regarded as the best indicator of success, there are other good indicators out there before there is revenue," Goodson told the BBC.

"Take something like Facebook, which is an example from Web 2.0. For two years there was rapid growth, rapid expansion, hiring, media coverage and so on without the revenue.

"So if you are in the business of needing to understand what's hot, then you need to know what is moving before the revenue numbers come through. For investors, getting in early is where the real money is made," he said.

Dr Sean Gourley, of New Zealand, worked out the algorithm used by YouNoodle to rate the startup's success. He also worked with the Pentagon to create a prediction model for a terrorist attack.

"Maybe 20 years ago if you were a venture capitalist in Silicon Valley, you knew everyone through your network and everyone came to you," Gourley, told BBC.

"Today the world is a lot bigger and there is a lot of information out there. We wade through the noise and create value by making sense of it all and putting a spotlight on companies that could easily slip under the radar, because they don't come through the old boys' network."

Goodson says people who want to invest in startups can use YouNoodle's scoring system to help eliminate some of the huge looming risk factors.

"Everyone wants to see money go into places where it's going to yield the best return. That's good for entrepreneurs and its good for the economy and for investors and we believe our algorithms will make a difference," said Goodson.

"It's a disgrace that only $100bn is being invested in the most valuable companies on the planet - businesses tackling the big social and environmental problems, businesses that could one day be the next Google or Apple."